1.Blue Star:
This air conditioner manufacturer rose by 13.6% over the past week till Friday, as it floated its Qualified Institutional Placement (QIP) to raise up to Rs 1,000 crore. It has set the floor price for the QIP at Rs 784.55 per share, nearly a 2% discount from Monday’s closing price of Rs 800. The management plans to use the capital to fund its capex plans of capacity expansion and also reduce its debt. The company has planned a capex of Rs 750 crore over the next three years, with the major portion of it being executed in FY24 and FY25. It shows up in a screener for stocks in the PE Buy zone with a high Durability score and rising Momentum score.
With air-conditioner penetration at less than 10% in India, B. Thiagarajan, MD of Blue Star said, “The long-term prospects for the business will continue to be good and we project that for the industry and Blue Star the growth will be at least 10% and 15% respectively in FY24.”
According to ICICI Securities, intense summer conditions and rising affordability will drive robust demand in the industry in the coming years. It also expects the company to gain market share in the coming quarters given its dominant market presence and focus on distribution expansion. According to Trendlyne’s Forecaster, the consensus recommendation from 20 analysts on the stock is a ‘Buy’.
Although the firm’s largest segment, unitary products (room air conditioners), saw muted revenue growth in Q1FY24 due to unseasonal rains in North India, it still managed to gain market share in the segment. Nikhil Sohoni, CFO of Blue Star noted, “While the summer season impacted room air conditioner sales, we hope that demand will revive in the festive season”. He added, “We are optimistic about the prospects for the rest of the year.”
2. UPL:
This agrochemicals firm is seeing an uptick in demand for its products in North and South America. These regions contributed 20.5% to the company’s overall revenue. In a recent report Citi anticipates that the profitability of United States farmers in CY23 will surpass historical levels. The US Agriculture Department forecasts an increase in soybean production in Latin America during the current fiscal year. Citi adds that prices of generic chemicals are close to bottoming out, and a recovery appears to be on the cards from the first half of 2024. According to Trendlyne Technicals, the stock increased by 5% in the past month.
The company’s Q1FY24 net profit fell by 81.1% YoY to Rs 166 crore and its revenue dropped by 17.2% YoY. The weak set of numbers has driven the stock down by 10.4% in the past three months. However, management indicated that new products such as Evolution and Feroce are outperforming in the market. The revenue from these differentiated products has risen from 24% to 35% of total revenues in Q1FY24. Looking ahead, the management expects a subdued demand from the domestic market in the near term, especially in Q2FY24, but anticipates a recovery starting in H2FY24.
KR Choksey says that the company's medium-term goal is to reduce net debt, aiming to achieve a Net Debt/EBITDA ratio below one while maintaining an 'investment grade' credit rating. They anticipate that UPL's emphasis on high-growth products like differentiated offerings, specialty chemicals, and seeds will boost market share and drive future revenue growth.
3. SJVN:
This electric utilities company has been volatile over the past few trading days. Following an 8.4% rise in share price in two consecutive sessions, SJVN plunged over 13% intra-day on Thursday after Centre’s Power Ministry (representing the President of India, promoter of the company) launched an offer for sale (OFS) to offload up to 4.9% equity stake in the company.
This comes right after the company’s share price surged 6.6% on Wednesday and touched a new 52-week high, after it signed a MoU with Power Finance Corp for financial assistance of projects worth Rs 1.2 lakh crore. The projects include renewable energy and thermal generation projects to be set up at a total cost of approximately Rs 1.2 lakh crore.
Despite the sharp fall on Thursday, the company’s share price has risen 30.3% in the past month, following multiple order wins. Earlier this month, the company, through its arm SJVN Green Energy, signed a power purchase agreement with Bhakra Beas Management Board (BBMB) for an 18 MW solar power project. The project is expected to be commissioned by August 2024.
In August, it received an order from Assam Power Development Corp for three solar power projects with a cumulative capacity 320 MW. It features in a screener of stocks that are up by more than 20% over the past month.
JM Financial has a ‘Buy’ rating on SJVN as the brokerage has a positive outlook on India’s hydroelectric power sector. According to Trendlyne’s Forecaster, its revenue is expected to increase by 9% in FY24.
4. Power Grid Corp of India:
We have one more electric utilities stock this week. Power Grid rose 2.1% over the past week, outperforming the Nifty 50 index, which fell 2.1% over the same period. It appears in a screener of stocks near their 52-week highs with significant volume.
This rise comes after Union Power Minister, RK Singh said that India plans to add 25-30 GW of thermal power capacity. This is in addition to the 50 GW expansion which is already under construction. The increase in thermal power capacity is on the back of ever increasing power demand, which reached a record high of 241 GW towards the end of August.
The company also emerged as the preferred bidder under tariff based competitive bidding (TBCB) to establish an inter-state transmission system project in Rajasthan on September 11. The project is to establish a new 765/400 kV substation along with a static synchronous compensator (STATCOM) at Ramgarh and a 765kV D/C transmission line.
Sharekhan maintained its ‘Buy’ rating on the stock with a target price of Rs 290 per share. The brokerage believes that the company’s orders in hand worth Rs 48,700 crore and a strong order pipeline in the transmission segment will aid in profitability growth. It expects the company’s net profit to grow at a CAGR of 8.6% over FY22-25. It also has a ‘Buy’ consensus from 13 out of 19 analysts tracking the stock.
5. Hindalco Industries:
This aluminium manufacturer fell 5.9% since its 52-week high of Rs 508.9 on September 14, 2023. It hit a 52-week high after the company inked a partnership agreement with Italy-based Metra SpA to enhance aluminium extrusion and fabrication technology to manufacture Vande Bharat rail coaches. It plans to invest Rs 2,000 crore for the project. Novelis, a subsidiary, signed a contract with Ball Corp to supply aluminium beverage can sheets to Ball’s can-making plants.
In Q1FY24, Hindalco beat Trendlyne Forecaster’s estimate for net profit by 24.5% despite its profit falling 40.4% YoY to Rs 2,454 crore. Its revenue also fell by 8.3% YoY but beat the estimate by 6.7%. Sales were affected in Q1 due to the destocking of cookware, but the management is optimistic that sales volumes will recover and exceed expectations in Q2 as destocking is almost over, and due to high demand.
Hindalco’s Silvassa extrusion facility started operations in Q1 and the company is increasing its capacity. Its Aditya Aluminium's cold-rolling facility is also expected to begin by FY25. This will lead to a 50% increase in downstream aluminium capacity by FY25. The aluminium manufacturer has guided a capex of Rs 4,000-4,500 crore for Indian operations for FY24. It has also guided capex for the arm Novelis of $1.6-1.9 billion focusing on increasing greenfield rolling capacity, removing bottlenecks and setting up recycling units.
Geojit BNP Paribas has upgraded Hindalco to a ‘Buy’ on the back of strong domestic demand, volume growth, successful completion of destocking, improved margins, and ambitious expansion projects in the downstream business. The analysts also expect the cost of aluminium and coal prices to decline further in Q2. The company appears in a screener for stocks with brokers upgrading recommendations or target prices in the past three months.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
